How Does Corporate Governance Affect Bank Capitalization Strategies?

This paper examines how corporate governance and executive compensation affected bank capitalization strategies for an international sample of banks in 2003-2011. "Good" corporate governance, which favors shareholder interests, is found t...

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Main Authors:	Anginer, Deniz, Demirguc-Kunt, Asli, Huizinga, Harry, Ma, Kebin
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ACCOUNTING AFFILIATED ORGANIZATIONS AGENCY COSTS AGENCY PROBLEMS ANTI-TAKEOVER PROVISION ANTI-TAKEOVER PROVISIONS ASSETS RATIO BAILOUTS BANK ASSETS BANK CAPITAL BANK CAPITALIZATION BANK FAILURE BANK FAILURES BANK HOLDING BANK HOLDING COMPANIES BANK MARKET BANK REGULATION BANK RISK BANK VALUATION BANKING CRISIS BANKING INDUSTRY BANKS BOARD MEMBERS BOARD MEMBERSHIP BOOK VALUE BUSINESS CYCLE CAPITAL ADJUSTMENT CAPITAL MARKET CAPITAL STRUCTURE CAPITAL STRUCTURES CASH FLOWS CDS CEO CEOS CHECKS CHIEF EXECUTIVE COMMERCIAL BANKS COMMON EQUITY COMMON SHARE COMMON SHAREHOLDER COMMON SHAREHOLDERS COMMON SHARES COMPANIES ACT COMPANY COMPENSATION PACKAGE COMPENSATION PACKAGES COMPENSATION POLICIES CORPORATE GOVERNANCE CORPORATE GOVERNANCE AFFECT CORPORATE GOVERNANCE AFFECTS DEBT DELAWARE DELTA DEPOSIT DEPOSIT INSURANCE DEVELOPMENT POLICY DIVIDEND PAYMENT DIVIDEND PAYMENTS DIVIDEND POLICIES DIVIDEND POLICY DIVIDENDS DUMMY VARIABLE DUMMY VARIABLES EQUITY CAPITAL EQUITY CAPITAL MARKET EX ANTE EXPECTED VALUE FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL STUDIES FREE RIDER FREE RIDER PROBLEMS GOVERNANCE ISSUES GOVERNMENT BONDS GOVERNMENT GUARANTEES HUMAN CAPITAL INCENTIVES OF SHAREHOLDERS INCOME INCORPORATED INDEPENDENT BOARDS INDEPENDENT DIRECTOR INDEPENDENT DIRECTORS INSTITUTIONAL SHAREHOLDER INSURANCE PREMIUM INTERESTS OF SHAREHOLDERS INTERNATIONAL BANK INTERNATIONAL FINANCIAL CRISIS ISSUANCE LIMITED LOAN LOWER LEVERAGE MANAGERS MARKET DATA MARKET VALUE MINORITY INTERESTS MINORITY SHAREHOLDER MINORITY SHAREHOLDER RIGHTS MONETARY FUND MORTGAGE MORTGAGE-BACKED SECURITIES NEGATIVE INCOME SHOCK NEGATIVE INCOME SHOCKS NEGATIVE SHOCK NEGATIVE SHOCKS PAYOUT PENSION PENSION RIGHTS PORTFOLIO POSITIVE COEFFICIENT POSITIVE COEFFICIENTS PRICE INCREASES PRICE MOVEMENTS PRICE RISK PRICE VOLATILITY PRINCIPLE OF SHAREHOLDER PRIMACY PRIVATE INVESTORS PROXY RATE OF RETURN RESERVES RETURN RETURN ON ASSETS RETURNS RISK CONTROLS RISK TAKING RISK WEIGHTED ASSETS SAFETY NET SHARE OWNERSHIP SHAREHOLDER SHAREHOLDER INTERESTS SHAREHOLDER VALUE SHAREHOLDERS STOCK INVESTORS STOCK ISSUANCE STOCK MARKET STOCK OPTION STOCK OPTIONS STOCK OWNERSHIP STOCK PRICE SUBORDINATED DEBT TAKEOVER TANGIBLE ASSETS TAX TIER 1 CAPITAL TIER 2 CAPITAL VALUATION VALUATIONS WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2013/10/18343642/corporate-governance-affect-bank-capitalization-strategies http://hdl.handle.net/10986/16853

id	okr-10986-16853
recordtype	oai_dc
spelling	okr-10986-168532021-04-23T14:03:32Z How Does Corporate Governance Affect Bank Capitalization Strategies? Anginer, Deniz Demirguc-Kunt, Asli Huizinga, Harry Ma, Kebin ACCOUNTING AFFILIATED ORGANIZATIONS AGENCY COSTS AGENCY PROBLEMS ANTI-TAKEOVER PROVISION ANTI-TAKEOVER PROVISIONS ASSETS RATIO BAILOUTS BANK ASSETS BANK CAPITAL BANK CAPITALIZATION BANK FAILURE BANK FAILURES BANK HOLDING BANK HOLDING COMPANIES BANK MARKET BANK REGULATION BANK RISK BANK VALUATION BANKING CRISIS BANKING INDUSTRY BANKS BOARD MEMBERS BOARD MEMBERSHIP BOOK VALUE BUSINESS CYCLE CAPITAL ADJUSTMENT CAPITAL MARKET CAPITAL STRUCTURE CAPITAL STRUCTURES CASH FLOWS CDS CEO CEOS CHECKS CHIEF EXECUTIVE COMMERCIAL BANKS COMMON EQUITY COMMON SHARE COMMON SHAREHOLDER COMMON SHAREHOLDERS COMMON SHARES COMPANIES ACT COMPANY COMPENSATION PACKAGE COMPENSATION PACKAGES COMPENSATION POLICIES CORPORATE GOVERNANCE CORPORATE GOVERNANCE AFFECT CORPORATE GOVERNANCE AFFECTS DEBT DELAWARE DELTA DEPOSIT DEPOSIT INSURANCE DEVELOPMENT POLICY DIVIDEND PAYMENT DIVIDEND PAYMENTS DIVIDEND POLICIES DIVIDEND POLICY DIVIDENDS DUMMY VARIABLE DUMMY VARIABLES EQUITY CAPITAL EQUITY CAPITAL MARKET EX ANTE EXPECTED VALUE FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL STUDIES FREE RIDER FREE RIDER PROBLEMS GOVERNANCE ISSUES GOVERNMENT BONDS GOVERNMENT GUARANTEES HUMAN CAPITAL INCENTIVES OF SHAREHOLDERS INCOME INCORPORATED INDEPENDENT BOARDS INDEPENDENT DIRECTOR INDEPENDENT DIRECTORS INSTITUTIONAL SHAREHOLDER INSURANCE PREMIUM INTERESTS OF SHAREHOLDERS INTERNATIONAL BANK INTERNATIONAL FINANCIAL CRISIS ISSUANCE LIMITED LOAN LOWER LEVERAGE MANAGERS MARKET DATA MARKET VALUE MINORITY INTERESTS MINORITY SHAREHOLDER MINORITY SHAREHOLDER RIGHTS MONETARY FUND MORTGAGE MORTGAGE-BACKED SECURITIES NEGATIVE INCOME SHOCK NEGATIVE INCOME SHOCKS NEGATIVE SHOCK NEGATIVE SHOCKS PAYOUT PENSION PENSION RIGHTS PORTFOLIO POSITIVE COEFFICIENT POSITIVE COEFFICIENTS PRICE INCREASES PRICE MOVEMENTS PRICE RISK PRICE VOLATILITY PRINCIPLE OF SHAREHOLDER PRIMACY PRIVATE INVESTORS PROXY RATE OF RETURN RESERVES RETURN RETURN ON ASSETS RETURNS RISK CONTROLS RISK TAKING RISK WEIGHTED ASSETS SAFETY NET SHARE OWNERSHIP SHAREHOLDER SHAREHOLDER INTERESTS SHAREHOLDER VALUE SHAREHOLDERS STOCK INVESTORS STOCK ISSUANCE STOCK MARKET STOCK OPTION STOCK OPTIONS STOCK OWNERSHIP STOCK PRICE SUBORDINATED DEBT TAKEOVER TANGIBLE ASSETS TAX TIER 1 CAPITAL TIER 2 CAPITAL VALUATION VALUATIONS WEALTH This paper examines how corporate governance and executive compensation affected bank capitalization strategies for an international sample of banks in 2003-2011. "Good" corporate governance, which favors shareholder interests, is found to give rise to lower bank capitalization. Boards of intermediate size, separation of the chief executive officer and chairman roles, and an absence of anti-takeover provisions, in particular, lead to low bank capitalization. However, executive options and stock wealth invested in the bank are associated with better capitalization except just before the crisis in 2006. In that year, stock options wealth was associated with lower capitalization, which suggests that potential gains from taking on more bank risk outweighed the prospect of additional loss. Banks' tendencies to continue payouts to shareholders after experiencing negative income shocks are shown to reflect executive risk-taking incentives. 2014-02-04T16:25:33Z 2014-02-04T16:25:33Z 2013-10 http://documents.worldbank.org/curated/en/2013/10/18343642/corporate-governance-affect-bank-capitalization-strategies http://hdl.handle.net/10986/16853 English en_US Policy Research Working Paper;No. 6636 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCOUNTING AFFILIATED ORGANIZATIONS AGENCY COSTS AGENCY PROBLEMS ANTI-TAKEOVER PROVISION ANTI-TAKEOVER PROVISIONS ASSETS RATIO BAILOUTS BANK ASSETS BANK CAPITAL BANK CAPITALIZATION BANK FAILURE BANK FAILURES BANK HOLDING BANK HOLDING COMPANIES BANK MARKET BANK REGULATION BANK RISK BANK VALUATION BANKING CRISIS BANKING INDUSTRY BANKS BOARD MEMBERS BOARD MEMBERSHIP BOOK VALUE BUSINESS CYCLE CAPITAL ADJUSTMENT CAPITAL MARKET CAPITAL STRUCTURE CAPITAL STRUCTURES CASH FLOWS CDS CEO CEOS CHECKS CHIEF EXECUTIVE COMMERCIAL BANKS COMMON EQUITY COMMON SHARE COMMON SHAREHOLDER COMMON SHAREHOLDERS COMMON SHARES COMPANIES ACT COMPANY COMPENSATION PACKAGE COMPENSATION PACKAGES COMPENSATION POLICIES CORPORATE GOVERNANCE CORPORATE GOVERNANCE AFFECT CORPORATE GOVERNANCE AFFECTS DEBT DELAWARE DELTA DEPOSIT DEPOSIT INSURANCE DEVELOPMENT POLICY DIVIDEND PAYMENT DIVIDEND PAYMENTS DIVIDEND POLICIES DIVIDEND POLICY DIVIDENDS DUMMY VARIABLE DUMMY VARIABLES EQUITY CAPITAL EQUITY CAPITAL MARKET EX ANTE EXPECTED VALUE FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL STUDIES FREE RIDER FREE RIDER PROBLEMS GOVERNANCE ISSUES GOVERNMENT BONDS GOVERNMENT GUARANTEES HUMAN CAPITAL INCENTIVES OF SHAREHOLDERS INCOME INCORPORATED INDEPENDENT BOARDS INDEPENDENT DIRECTOR INDEPENDENT DIRECTORS INSTITUTIONAL SHAREHOLDER INSURANCE PREMIUM INTERESTS OF SHAREHOLDERS INTERNATIONAL BANK INTERNATIONAL FINANCIAL CRISIS ISSUANCE LIMITED LOAN LOWER LEVERAGE MANAGERS MARKET DATA MARKET VALUE MINORITY INTERESTS MINORITY SHAREHOLDER MINORITY SHAREHOLDER RIGHTS MONETARY FUND MORTGAGE MORTGAGE-BACKED SECURITIES NEGATIVE INCOME SHOCK NEGATIVE INCOME SHOCKS NEGATIVE SHOCK NEGATIVE SHOCKS PAYOUT PENSION PENSION RIGHTS PORTFOLIO POSITIVE COEFFICIENT POSITIVE COEFFICIENTS PRICE INCREASES PRICE MOVEMENTS PRICE RISK PRICE VOLATILITY PRINCIPLE OF SHAREHOLDER PRIMACY PRIVATE INVESTORS PROXY RATE OF RETURN RESERVES RETURN RETURN ON ASSETS RETURNS RISK CONTROLS RISK TAKING RISK WEIGHTED ASSETS SAFETY NET SHARE OWNERSHIP SHAREHOLDER SHAREHOLDER INTERESTS SHAREHOLDER VALUE SHAREHOLDERS STOCK INVESTORS STOCK ISSUANCE STOCK MARKET STOCK OPTION STOCK OPTIONS STOCK OWNERSHIP STOCK PRICE SUBORDINATED DEBT TAKEOVER TANGIBLE ASSETS TAX TIER 1 CAPITAL TIER 2 CAPITAL VALUATION VALUATIONS WEALTH
spellingShingle	ACCOUNTING AFFILIATED ORGANIZATIONS AGENCY COSTS AGENCY PROBLEMS ANTI-TAKEOVER PROVISION ANTI-TAKEOVER PROVISIONS ASSETS RATIO BAILOUTS BANK ASSETS BANK CAPITAL BANK CAPITALIZATION BANK FAILURE BANK FAILURES BANK HOLDING BANK HOLDING COMPANIES BANK MARKET BANK REGULATION BANK RISK BANK VALUATION BANKING CRISIS BANKING INDUSTRY BANKS BOARD MEMBERS BOARD MEMBERSHIP BOOK VALUE BUSINESS CYCLE CAPITAL ADJUSTMENT CAPITAL MARKET CAPITAL STRUCTURE CAPITAL STRUCTURES CASH FLOWS CDS CEO CEOS CHECKS CHIEF EXECUTIVE COMMERCIAL BANKS COMMON EQUITY COMMON SHARE COMMON SHAREHOLDER COMMON SHAREHOLDERS COMMON SHARES COMPANIES ACT COMPANY COMPENSATION PACKAGE COMPENSATION PACKAGES COMPENSATION POLICIES CORPORATE GOVERNANCE CORPORATE GOVERNANCE AFFECT CORPORATE GOVERNANCE AFFECTS DEBT DELAWARE DELTA DEPOSIT DEPOSIT INSURANCE DEVELOPMENT POLICY DIVIDEND PAYMENT DIVIDEND PAYMENTS DIVIDEND POLICIES DIVIDEND POLICY DIVIDENDS DUMMY VARIABLE DUMMY VARIABLES EQUITY CAPITAL EQUITY CAPITAL MARKET EX ANTE EXPECTED VALUE FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL STUDIES FREE RIDER FREE RIDER PROBLEMS GOVERNANCE ISSUES GOVERNMENT BONDS GOVERNMENT GUARANTEES HUMAN CAPITAL INCENTIVES OF SHAREHOLDERS INCOME INCORPORATED INDEPENDENT BOARDS INDEPENDENT DIRECTOR INDEPENDENT DIRECTORS INSTITUTIONAL SHAREHOLDER INSURANCE PREMIUM INTERESTS OF SHAREHOLDERS INTERNATIONAL BANK INTERNATIONAL FINANCIAL CRISIS ISSUANCE LIMITED LOAN LOWER LEVERAGE MANAGERS MARKET DATA MARKET VALUE MINORITY INTERESTS MINORITY SHAREHOLDER MINORITY SHAREHOLDER RIGHTS MONETARY FUND MORTGAGE MORTGAGE-BACKED SECURITIES NEGATIVE INCOME SHOCK NEGATIVE INCOME SHOCKS NEGATIVE SHOCK NEGATIVE SHOCKS PAYOUT PENSION PENSION RIGHTS PORTFOLIO POSITIVE COEFFICIENT POSITIVE COEFFICIENTS PRICE INCREASES PRICE MOVEMENTS PRICE RISK PRICE VOLATILITY PRINCIPLE OF SHAREHOLDER PRIMACY PRIVATE INVESTORS PROXY RATE OF RETURN RESERVES RETURN RETURN ON ASSETS RETURNS RISK CONTROLS RISK TAKING RISK WEIGHTED ASSETS SAFETY NET SHARE OWNERSHIP SHAREHOLDER SHAREHOLDER INTERESTS SHAREHOLDER VALUE SHAREHOLDERS STOCK INVESTORS STOCK ISSUANCE STOCK MARKET STOCK OPTION STOCK OPTIONS STOCK OWNERSHIP STOCK PRICE SUBORDINATED DEBT TAKEOVER TANGIBLE ASSETS TAX TIER 1 CAPITAL TIER 2 CAPITAL VALUATION VALUATIONS WEALTH Anginer, Deniz Demirguc-Kunt, Asli Huizinga, Harry Ma, Kebin How Does Corporate Governance Affect Bank Capitalization Strategies?
relation	Policy Research Working Paper;No. 6636
description	This paper examines how corporate governance and executive compensation affected bank capitalization strategies for an international sample of banks in 2003-2011. "Good" corporate governance, which favors shareholder interests, is found to give rise to lower bank capitalization. Boards of intermediate size, separation of the chief executive officer and chairman roles, and an absence of anti-takeover provisions, in particular, lead to low bank capitalization. However, executive options and stock wealth invested in the bank are associated with better capitalization except just before the crisis in 2006. In that year, stock options wealth was associated with lower capitalization, which suggests that potential gains from taking on more bank risk outweighed the prospect of additional loss. Banks' tendencies to continue payouts to shareholders after experiencing negative income shocks are shown to reflect executive risk-taking incentives.
format	Publications & Research :: Policy Research Working Paper
author	Anginer, Deniz Demirguc-Kunt, Asli Huizinga, Harry Ma, Kebin
author_facet	Anginer, Deniz Demirguc-Kunt, Asli Huizinga, Harry Ma, Kebin
author_sort	Anginer, Deniz
title	How Does Corporate Governance Affect Bank Capitalization Strategies?
title_short	How Does Corporate Governance Affect Bank Capitalization Strategies?
title_full	How Does Corporate Governance Affect Bank Capitalization Strategies?
title_fullStr	How Does Corporate Governance Affect Bank Capitalization Strategies?
title_full_unstemmed	How Does Corporate Governance Affect Bank Capitalization Strategies?
title_sort	how does corporate governance affect bank capitalization strategies?
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2013/10/18343642/corporate-governance-affect-bank-capitalization-strategies http://hdl.handle.net/10986/16853
_version_	1764434699329994752

How Does Corporate Governance Affect Bank Capitalization Strategies?

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